Q: Dear SaaStr: If a VC Backs Out of a Signed Term Sheet, Should the Entrepreneur Spread the Word?
No.
First, there’s a good chance it’s at least 1% your fault. Rarely in an auto accident is one party truly 100% at fault. Are you sure you didn’t hide something, even inadvertently? That you were totally upfront about that issue with your co-founder? Etc. etc. We talked about 10+ reasons deals fall apart the other day. You’re likely at least 1% to blame. Perhaps not. But likely.
So if it’s even 1% your fault — you’ll look bad “spreading the word.” And it won’t get you anywhere.
Two, no one will care. Not really. I know, but the thing is, someone else will still take their money. Also, no one really thinks VCs are saints, folks. It’s a tough business, with sharp elbows, and half promises. Everyone knows this. If you refuse to work with VCs that have never done something remotely questionable — your VC network will end up being close to zero partners.
Three, let it go. As founders, we have to let a lot of stuff go. It’s hard. Man, it’s hard. But let it all go. Move on and focus on your business. Not this one episode.
…
Having said that, you’ll get your chance here. The answer isn’t to spread the word. The answer is that when a founder comes to you later, and says, should I take money from the Backed Out VC or from This Other VC — you can say the latter.
(note: an updated SaaStr Classic answer)
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Jason Lemkin, Khareem Sudlow
